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. Last Updated: 07/27/2016

IMF Deals Loan Rebuff to Kuchma

KIEV -- The head of an International Monetary Fund mission to Ukraine said there would be no agreement on resuming lending from a $2.6 billion loan program until after parliament passed the 2000 budget.

"There are going to be several months of very critical discussions, but hopefully we will reach an agreement over the next several weeks," Mohammad Shadman-Valavi told journalists after meeting new Prime Minister Viktor Yushchenko.

"We need to know what the parliament's position is on the budget - this is absolutely critical," he added, saying it would also take several weeks for the new government to hammer out its economic program.

Restarting the program, suspended in September over lagging reform efforts and a controversial export tax, is crucial to Ukraine's efforts this year to restructure what banking sources say will be over $2 billion in foreign debt.

Both Ukrainian and IMF officials stress that a realistic budget this year is another key to convincing creditors wearied by several debt restructurings over the last year to roll over more of the cash-strapped ex-Soviet state's debt.

Yushchenko, appointed at the end of December, outlined plans last week for broadening the tax base to raise revenues, but parliament has done little with the proposals and sent the draft budget back for reworking.

A repeat reading is unlikely before the chamber starts a new session at the beginning of February.

The IMF talks come as markets are starting to buzz about the possible terms Ukraine, which owes $3.1 billion this year and has around $800 million in Eurobond payments due this quarter, might offer to investors and creditors.

Dutch investment bank ING Barings said this week it had been appointed to lead manage an offer to exchange Ukraine's outstanding foreign currency bonds for new longer-dated debt.

The bonds eligible for exchange are a 500 million euro Eurobond, a 1.5 billion Deutsche mark Eurobond, $2 million outstanding on a zero-coupon bond due September 2000, $300 million of a Finance Ministry bond maturing in 2000 and 2001 and a $74 million bond due October 2000.

Ukraine is also expected to seek to reschedule $700 million of bilateral loans from sovereign lenders, although officials decline to comment until after reaching agreement with the IMF.

Shadman-Valavi said the government did intend to approach the Paris Club of sovereign creditors for rescheduling talks but he and Ukrainian officials declined further comment.

Ukraine had foreign reserves of $1.25 billion at the end of 1999. The hryvna currency is fragile and propped up mainly by tough trading rules.

The sticky financial situation has helped propel President Leonid Kuchma and his new government into promises of radically speeding up reforms this year.

Shadman-Valavi praised the new government's move on restructuring the government administrative system, but said it should be continued and combined with privatization and reforms in the energy and agriculture sectors.